Obama Tells Tall Tales About The Bush Years

Obama and other critics of Bush's tax cuts argue that they did little to boost economic growth or jobs. But they tend to start their count when Bush signed the first tax cut bill into law in mid-2001.

The problem is that much of that tax plan — including reductions to most of the income tax brackets — wasn't scheduled to take full effect until 2006.

Bush's second tax cut, signed in May 2003, accelerated those tax cuts, letting them kick in retroactively to the beginning of that year. The 2003 law also cut taxes on capital gains and dividends.

It turns out that the month after Bush signed that 2003 law, jobs and the economy finally started growing again.

From June 2003 to December 2007, the economy added 8.1 million jobs, according to the Bureau of Labor Statistics. The unemployment rate fell to 5% from 6.3%. Real GDP growth averaged close to 3% in the four-plus years after that, and the budget deficit fell steadily from 2004 to 2007.

And despite Obama's claim, Bush's policies did not increase income inequality. In fact, inequality was the same when Bush left office as when he came in, according to the Census Bureau. A study by University of California economist Emmanuel Saez found that inequality has climbed much faster under Obama.

What's more, the rich ended up paying a larger chunk of the federal income tax burden after Bush's tax cuts went into effect, with the share paid by the top 1% rising to 40% by 2007, up from 37% the year before Bush took office, according to IRS data.

Obama is correct that the country has tried a combination of deregulation and tax cuts before. That took place under President Reagan.

Reagan aggressively deregulated entire industries, while putting the brakes on new federal rules. As a result, regulatory compliance costs fell 8% during his time in office, and staffing dropped almost 7%.

At the same time, Reagan's tax cuts knocked taxes as a share of GDP down by 6%.

The result was an almost eight-year economic boom in which real quarterly GDP growth averaged 4.3%.

That's nearly double the average growth rate Obama's economic policies produced during the 3-year-old recovery.

A key attack line in President Obama's campaign stump speech these days is to claim that the country has tried Mitt Romney's economic policies already, and they were a dismal failure.

Romney, he says, wants to do two things: Cut taxes for the rich and massively deregulate the economy.

"The truth is," Obama says, "we tried (that) for almost a decade, and it didn't work."

Bush-era tax cuts and deregulation, he argues "resulted in the most sluggish job growth in decades" along with "rising inequality, surpluses turned into deficits, culminating in the worst economic crisis in our lifetimes."

There's just one problem. Obama's got his history wrong.

First, Bush was no big deregulator.

In fact, under Bush, the size and cost of the federal government's regulatory machinery increased dramatically, as Bush imposed dozens of major new rules.

Regulatory staffing, for example, climbed 44% during the Bush years, according to a study by researchers at Washington University in St. Louis and George Washington University.

By contrast, regulatory staffing was essentially flat under President Clinton.

Likewise, federal spending on regulations shot up 45% in real terms under Bush, compared with 26% under Clinton.

Obama himself has made the case that regulations climbed rapidly under Bush. "I have approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his," he said in a speech earlier this year.

To be sure, much of the Bush-era regulatory increase came as a result of the government's takeover of airport security in the wake of 9/11. But even excluding that, federal regulatory spending climbed 30% and regulatory jobs jumped 11% under Bush.

In addition, an analysis by the Heritage Foundation found that Bush-era regulations imposed about $30 billion in new economic costs.

One of them, the Sarbanes-Oxley Act, imposed vast new rules on the accounting and securities businesses, generating at least 20 new rule makings at the Securities and Exchange Commission. Sarb-Ox has been widely blamed for reducing the number of U.S. initial public offerings.

In addition, the banking deregulation, which Obama sometimes blames for contributing to the financial crisis, took place not under Bush but under Clinton, who signed the bill to repeal Depression-era banking rules in 1999.

The Gramm-Leach-Bliley Act enjoyed massive bipartisan support, with just eight Senators and 57 House members voting against it.

Nor were the Bush tax cuts a big failure as Obama claims.

Obama and other critics of Bush's tax cuts argue that they did little to boost economic growth or jobs. But they tend to start their count when Bush signed the first tax cut bill into law in mid-2001.

The problem is that much of that tax plan — including reductions to most of the income tax brackets — wasn't scheduled to take full effect until 2006.

Bush's second tax cut, signed in May 2003, accelerated those tax cuts, letting them kick in retroactively to the beginning of that year. The 2003 law also cut taxes on capital gains and dividends.

It turns out that the month after Bush signed that 2003 law, jobs and the economy finally started growing again.

From June 2003 to December 2007, the economy added 8.1 million jobs, according to the Bureau of Labor Statistics. The unemployment rate fell to 5% from 6.3%. Real GDP growth averaged close to 3% in the four-plus years after that, and the budget deficit fell steadily from 2004 to 2007.

And despite Obama's claim, Bush's policies did not increase income inequality. In fact, inequality was the same when Bush left office as when he came in, according to the Census Bureau. A study by University of California economist Emmanuel Saez found that inequality has climbed much faster under Obama.

What's more, the rich ended up paying a larger chunk of the federal income tax burden after Bush's tax cuts went into effect, with the share paid by the top 1% rising to 40% by 2007, up from 37% the year before Bush took office, according to IRS data.

Obama is correct that the country has tried a combination of deregulation and tax cuts before. That took place under President Reagan.

Reagan aggressively deregulated entire industries, while putting the brakes on new federal rules. As a result, regulatory compliance costs fell 8% during his time in office, and staffing dropped almost 7%.

At the same time, Reagan's tax cuts knocked taxes as a share of GDP down by 6%.

The result was an almost eight-year economic boom in which real quarterly GDP growth averaged 4.3%.

That's nearly double the average growth rate Obama's economic policies produced during the 3-year-old recovery.

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